Feds flee costliest health plans

Oct. 31, 2011 - 06:00AM
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Skyrocketing health insurance premiums over the last five years have decisively changed the federal health care landscape. (File photo / Getty Images)

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Skyrocketing health insurance premiums over the last five years have decisively changed the federal health care landscape.

Since 2007, nearly 300,000 employees and retirees have left the three most popular high-cost health plans. And over the last five years, nearly 500,000 have signed up for the lowest-cost versions of those same plans.

Insurance premium increases  which in 2010 hit a five-year high of 7.4 percent on average are driving the shift.

"The reason for it is simple: People look for better deals, and oftentimes find them," said Walt Francis, who writes the annual Checkbook health care guide for federal employees. "That's how this program has been working for 50 years. It's greatly reduced costs from what they otherwise would be."

The Office of Personnel Management, which runs FEHBP, said in an e-mail that about 10 percent of active federal employees and 4 percent of retirees change health plans each year  usually selecting a less expensive program. Those shifts help hold down premium costs by about 1 percent, OPM said. Feds in the Washington area, for example, can choose from 27 different plans, and OPM said the wide assortment of choices leads directly to movement among plans.

"One of the unique advantages of the FEHB is the large number of plans from which enrollees can choose," Jonathan Foley, OPM's director of planning and policy analysis, said in an Oct. 20 e-mail. "In a given open season, the net effect of enrollee movement is a reduction in total premium increase when compared to the increase that would have resulted from a static population."

Those population shifts likely helped hold the 2012 premium increase to 3.8 percent, the lowest since 2008. OPM said efforts to cut costs, increase the use of preventative medicine, and a recession-related decline in the use of health care also contributed to the smaller increase.

Employees and retirees will be able to choose their 2012 health plans during open season Nov. 14 through Dec. 12.

The Blue Cross and Blue Shield standard plan  by far the most popular in FEHBP  has lost 10 percent of its enrollees since 2007. Last month, OPM announced the Blue Cross standard premiums will decline in 2012, by 0.4 percent for the family plan and 0.9 percent for the self-only plan. Blue Cross officials were unavailable for comment.

But the decline in Blue Cross standard plan's enrollment was more than made up by the growth in its basic plan, increasing the insurer's overall market share in the FEHBPfrom 58 percent in 2007 to 61 percent in 2011. Francis said this suggests many enrollees who were turned off by higher Blue Cross standard plan premiums may have still liked the company and its selection of medical providers, and chose to stay with it.

"They wanted to change plans, but they didn't want to lose their family doctor," Francis said.

Government Employees Health Association (GEHA) Vice President Julie Browne said some new federal employees may be coming from private-sector employers that offer more frugal health plans, and decide against higher-cost options.

"They may be used to that kind of a plan, and they may not have had a Cadillac-type plan available to them," Browne said. "We've tried to offer all types of plans that employees are looking for."

Colleen Murphy, president and CEO of Asparity Decision Solutions, said the federal government will also benefit from enrollees' shift to lower-cost plans, since the government covers about 70 percent of premium costs. Asparity, which has been acquired by ADP, offers a http://www.plansmartchoice.com/">free online tool called PlanSmartChoice that lets FEHBP enrollees compare health, dental and vision plans, and decide which is best for them.

Murphy said the number of PlanSmartChoice users shot up last year, from 50,000 in fall 2009 to 85,000 in fall 2010. She said 38 percent of the site's users switched plans during the last open season.

"We saw a significant increase in Blue Cross basic" enrollment, Murphy said. "There are a lot of people who really like the Blue Cross Blue Shield brand."

It's unclear whether these trends will continue. With the economy remaining tough, federal pay frozen and premiums continuing to increase  even if at a reduced rate  experts such as Murphy and Aetna federal marketing executive Candice Sanchez think federal employees will continue to seek out lower-cost alternatives.

But Francis thinks that the drop in some popular plans' premiums and lower overall premium increases will slow the flight of feds from higher-cost plans during this open season.

The stats also show a continuing decline in health maintenance organization enrollment. Browne said part of this may be due to several HMOs dropping out of FEHBP over the last few years.

"As HMOs have left [FEHBP], those in HMO plans have shifted toward the fee-for-service and [high-deductible health] plans," Browne said.

Aetna still offers an HMO plan. Sanchez said some people who leave HMOs may be looking for more flexibility.

Francis said it's unclear exactly why HMOs are losing market share, but said it may be because many don't do as good a job controlling their premiums.

As more federal employees retire, they may be moving away from HMOs, Francis said. He said many HMOs have not added so-called "Medicare wraparound" supplemental policies that cover benefits not offered by Medicare. So when federal employees who had been on HMO plans retire, Francis said, they might move to fee-for-service plans that offer a Medicare wraparound. He expects this trend to continue over the next few years as retirements increase, then probably taper off.

HMOs reached their peak popularity in 1999, when they controlled 30 percent of the federal market share. But they've steadily declined, and in 2011 accounted for 20 percent of FEHBP enrollees.